Accounting Exam - Operating, Investing, Financing Activities

Inflow from investing activities

Selling of plant, property, equipment

Inflow from investing activities

Selling shares

Operating Activities

Should have positive cash flows, so that the entity can expand, generate cash, meet financial obligations and continue as a going concern

Outflow from investing activities

Lending of cash to other entities

Operating Activities

Normal activities of the entity

Financing Activities

Paying out shares to owners weakens the financial position of the entity, as there are fewer resources with which to re-invest

Outflow from financing activities

Payment of dividends

Outflow from operating activity

Payment of interest and of tax

Outflow from operating activity

Payment of salaries/wages

Outflow from operating activity

Payment to suppliers

Operating Activities

Profit should be lower than this, as profit includes depreciation/amortisation

Inflow from operating activity

Receipt of interest/dividend (depending on the nature of the entity)

Outflow from financing activities

Repayment of borrowings

Outflow from investing activities

Acquisition of plant, property, equipment

Outflow from investing activities

Acquisition of shares

Outflow from financing activities

Acquisition of/buying-back of shares

Investing activities

Acquisition/disposal of non-current assets and indicates the investment decisions of the entity

Inflow from operating activity

Cash acquired from credit-paying customers

Inflow from financing activities

Cash received from acquiring loans

Inflow from financing activities

Cash received from selling shares

Inflow from operating activity

Cash sales of goods/services

Financing Activities

Change the size/composition of the financial structure of the entity

Financing Activities

If this were positive, the entity may be using this acquired cash for investment. If it were being used to fund operating activities or continually increasing, there may be a risk of insolvency

Investing Activities

This is generally negative for entities wishing to expand